Paris Club agreements may contain a provision enabling creditors to voluntarily engage in debt swaps. These operations may take the form of debt-for-nature, debt-for-aid, debt-for-equity or other local currency debt swaps. These swaps usually take one of the following terms:
- the debtor country directs the servicing of the debt to a fund that will be used to finance development projects in the country (debt-for-development swaps)
- the sale of the debt by the creditor government to an investor who in turns sells the debt to the debtor government in return for shares in a local company or local currency to be used for projects in the country.
In order to preserve comparability of treatment and solidarity among creditors, debt swap amounts for non-ODA claims are capped at a certain percentage of each individual Paris Club creditor's stock of claims. There are no restrictions regarding debt swaps on ODA claims.
To ensure full transparency between creditors, debtors and creditors submit a report to the Paris Club Secretariat on the transactions conducted.